COMMITTEE OF PUBLIC ACCOUNTS díospóireacht -
Thursday, 27 Feb 2003

Vol. 1 No. 10

2001 Annual Report of the Comptroller and Auditor General and Appropriation Accounts.

Vote 40 - Department of Social and Family Affairs.

Mr. John Hynes (Secretary General, Department of Social and Family Affairs) called and examined.

Chairman

I welcome everyone to this meeting. Witnesses should be made aware that they do not enjoy absolute privilege and should be apprised as follows. Witnesses' attention is drawn to the fact that from 2 August 1998, section 10 of the Committees of the Houses of the Oireachtas (Compellability, Privileges and Immunities of Witnesses) Act 1997 grants certain rights to persons who are identified in the course of the committee's proceedings. These rights include the right to give evidence, the right to produce or send documents to the committee, the right to appear before the committee either in person or through a representative, the right to make a written or oral submission, the right to request the committee to direct the attendance of witnesses and the production of documents and the right to cross-examine witnesses. For the most part, these rights may only be exercised with the consent of the committee. Persons being invited before the committee are made aware of these rights and any person identified in the course of proceedings who is not present may have to be made aware of these rights and provided with a transcript of the relevant part of the committee's proceedings if the committee considers it appropriate in the interests of justice.

Notwithstanding this provision in legislation, I remind members of the long-standing parliamentary practice to the effect that members should not comment on, criticise or make charges against a person outside the House or an official, either by name or in such a way as to make him or her identifiable. Members are also reminded of the provisions within Standing Order 156 that the committee shall also refrain from inquiring into the merits of a policy or policies of the Government, or a Minister of the Government, or the merits of the objectives of such a policy.

I welcome Mr. John Hynes, Secretary General of the Department of Social and Family Affairs, to the meeting. This is his first time here as Secretary General and I wish him well. We will not be too hard on him today.

Mr. John Hynes

I am accompanied by Bernadette Lacey, the director general of social welfare services, which is the organisation that runs the delivery of services; Eoin Ó Broin who is the director of regions in charge of the regional managers and local offices of the Department; Anne Tynan from our accounts branch; and Brendan Friel who is responsible for the overpayments area of the Department.

Chairman

Will the official from the Department of Finance identify himself?

Mr. Dermot Quigley

My name is Dermot Quigley

Chairman

Paragraph 11 of the Comptroller and Auditor Generals Report reads:

Chapter 11 - Department of Social and Family Affairs

11.1 Overpayments

The Department of Social and Family Affairs administers some 50 welfare schemes paid through Vote 40 and the Social Insurance Fund. Expenditure on assistance and insurance schemes was €3.98bn and €3.52bn respectively in 2001.

Table 1, Table 2 and Table 3 outline overall expenditure on various schemes over the period 1997 to 2001, and for the same period, the amounts recorded as overpayments, the amounts of overpayments attributed to fraud or suspected fraud and the Department's cumulative record of recovery since 1997.

Table 1 - Scheme Expenditure

	1997	1998	1999	2000	2001
	€m	€m	€m	€m	€m
Social Insurance	2,339	2,518	2,681	2,993	3,517
Social Assistance	3,162	3,260	3,320	3,425	3,983
Total	5,501	5,778	6,001	6,418	7,500

Table 2 - Number and Amount of overpayments recorded for recovery (Numbers shown in brackets)

	1997	1998	1999	2000	2001
	€m	€m	€m	€m	€m
Social Insurance	5.69 (12,925)	5.26 (13,897)	7.66 (18,080)	6.39 (15,252)	6.79 (15,786)
Social Assistance	20.70 (21,759)	22.96 (22,054)	20.79 (21,346)	20.59 (18,110)	19.26 (14,274)
Total	26.39 (34,684)	28.22 (35,951)	28.45 (39,426)	26.98 (33,362)	26.05 (30,060)

Table 3 - Number and Amount of overpayments attributed to fraud or suspected fraud (Numbers shown in brackets)

	1997	1998	1999	2000	2001
	€m	€m	€m	€m	€m
Social Insurance	2.56 (3,271)	2.75 (4,810)	3.22 (5,821)	3.39 (5,159)	3.27 (5,321)
Social Assistance	15.88 (7,914)	10.84 1 (9,383)	12.14 (9,273)	10.89 (7,466)	7.73 (5,350)
Total	18.44 (11,185)	13.59 (14,193)	15.36 (15,094)	14.28 (12,625)	11.00 (10,671)

The amount of overpayments attributed to fraud or suspected fraud compared to total overpayments since 1997 is summarised in Figure 1.

Figure 1

1 This fall of over €5m was principally due to a change in the way the Department classified overpayments arising from the estates of recipients of non-contributory social welfare scheme payments. Prior to 1998 such overpayments were deemed to be attributable to fraud or suspected fraud.

The Department's record of recovery of overpayments during the period 1997-2001 is shown in Table 4.

Table 4 - Department's record of recovery of overpayments 1997 to 2001

	1997	1998	1999	2000	2001
	€’000	€’000	€’000	€’000	€’000
Overpayments not disposed of at 1 January	44,545	47,716	53,619	60,581	64,374
Overpayments recorded for recovery	26,387	28,215	28,448	26,982	26,049
less
overpayments recorded in prior years cancelled	(382)	(480)	(292)	(447)	(668)
sums recovered in cash	(5,889)	(6,775)	(5,154)	(7,464)	(9,873)
sums withheld from current entitlements	(5,428)	(4,927)	(4,198)	(4,999)	(5,185)
net amounts written off as irrecoverable	(11,517)	(10,130)	(11,842)	(10,279)	(9,245)
Overpayments not disposed of at 31 December	47,716	53,619	60,581	64,374	65,452

Of the €65,452,289 overpayments outstanding at 31 December 2001 - €16,799,088 dates from 2001; €17,650,370 from 2000; €16,941,424 from 1999 and €14,061,407 from earlier years.

Prosecutions

Cases involving abuse of the system are considered with a view to taking legal proceedings. Prosecutions are taken against employers who fail to carry out their statutory obligations and persons who defraud the social welfare payments system. Prosecutions can either be by summary or indictment proceedings. Civil proceedings are taken to facilitate the recovery of scheme overpayments or the collection of PRSI arrears. Such cases are only taken where it has been established that the debtor has sufficient means to discharge the debt.

During 2001, 163 criminal cases (2000 - 263 cases) were forwarded to the Chief State Solicitor's Office for prosecution as shown in Table 5.

Table 5 - Criminal cases forwarded to the Chief State Solicitor

	2000	2001
Unemployment Assistance	164	98
Unemployment Benefit	56	43
Disability Benefit	8	9
Invalidity Pension	1	1
One Parent Family Payments	8	1
Other Schemes	4	2
Offences Committed by Employers	22	9
Total	263	163

A total of 192 prosecutions (2000 - 185 prosecutions) involving social welfare recipients were finalised in court in 2001. The total amount of overpayments assessed in cases of persons who attempted to or obtained benefits/assistance fraudulently was €915,471 (2000 - €846,609). The results of these 192 court cases and the penalties imposed are given in Table 6.

Table 6 - Results of Court Cases involving Social Welfare Recipients

	Fines Imposed2	Community Service	Imprisoned3	Probation Act	Proven No Penalty	Adjourned/Liberty to Re-enter	Bound to peace
Unemployment Assistance	62	1	27	22	11	1	2
Unemployment Benefit	22	-	7	8	7	2	1
Disability Benefit	4	1	-	3	2	-	-
Invalidity Pension	-	-	-	-	-	-	-
One Parent Family Payments	4	1	-	1	1	-	-
Other Schemes	-	-	2	-	-	-	-
Total	92	3	36	34	21	3	3

2 Fines to a value of €30,588 were imposed by the courts (€34,624 in 2000 in 100 cases).

3 33 subsequently suspended.

Prosecutions of 7 cases involving employers (2000 - 28 employers) were also finalised with 4 being fined4 and 3 recorded as proven/no penalty.

The number of prosecutions finalised in the courts since 1997 is summarised in Figure 2.

Figure 2

A total of 52 civil cases have been forwarded to the Chief State Solicitor's Office since 1997. Table 7 details the history of civil cases forwarded and the cases still pending with the Chief State Solicitor's Office and Table 8 details the outcome of the 28 civil cases finalised.

Table 7 - Civil cases sent to the Chief State Solicitor's Office

	1997	1998	1999	2000	2001	Total
To CSSO	14	9	9	6	14	52
Finalised	11	8	3	1	5	28
Pending	3	1	6	5	9	24

Table 8 - Results of civil cases finalised

	Total
Settlement reached without going to court 5	18
Finalised in the Supreme Court	1
Not pursued due to the circumstances of the debtor	5
Case statute barred	1
CSSO unable to serve summons	2
Recovered by instalments	128

4 Fines to the value of €2,095 were imposed by the courts (2000: €10,044 in 22 cases).

5 €240,765 in overpayments were recovered in these cases out of a total overpayment €302,784 recorded.

Mr. John Purcell

Chapter 11 of the report gives an outline of the level of overpayments of social welfare over the five year period, 1997 to 2001 and the extent to which overpayments have been recovered or written-off. The second part of the chapter deals with prosecution activity by the Department.

In 2001, just over €26 million was recorded as overpaid and the Department estimates that €11 million of that was attributable to fraud or suspected fraud. The amount attributable to fraud has fallen from €18.4 million over the five year period, but it is not a real reduction for the greater part. Rather, it is a consequence of the Department no longer treating estate cases involving the non-disclosure of means as fraudulent activity. Up to 1998, the Department treated them as concealment of means and classified them as possible fraud but they changed tack on that in 1998. Such estate cases accounted for almost €7 million of overpayments in 2001. By far the biggest single area of fraud is in unemployment assistance which accounted for €4.5 million in 2001. This is less than previous years, which probably reflects the overall improvement in employment. At the end of 2001, some €65 million in overpayments remained to be collected, after taking into account an average annual write-off of some €10 million. Of course that €65 million has to be considered in the context of the billions of euro disbursed by the Department annually. Nevertheless, it is a significant figure in its own right.

On prosecutions, the committee will note that the number of criminal cases involving social welfare recipients perpetrating or attempting fraud forwarded to the Chief State Solicitor fell from 263 in the previous year to 163 in 2001. The Accounting Officer may be able to shed some light on the underlying reasons for this fall. Of the prosecutions finalised in court in the year, 36 individuals were sentenced to terms of imprisonment. However, 33 of those had their sentences suspended.

Chairman

Do we have permission to publish the report?

Mr. Hynes

Yes. I thank the Chairman for the opportunity to address the committee. With the Chairman's permission and before referring in particular to the issues which are specifically referred to in the Comptroller and Auditor General's report, namely, overpayments and prosecutions, I would like to make a few general observations to put these issues into context.

In the year we are now discussing, 2001, total expenditure by the Department of Social and Family Affairs amounted to just over €7.8 billion. A breakdown of this figure into the different broad categories of schemes is given in the table which has been circulated.

The customer base of the Department has changed over recent years. The reduction in the numbers on the live register has been accompanied by substantial increases in the numbers qualifying under other schemes such as pensions, lone parent payments and payments to carers and the long-term ill. There have also been significant changes and improvement in schemes which have been implemented. The Department places a lot of emphasis on providing an efficient and effective service to customers. Considerable effort has been put into improving the delivery of services and, under the Department's customer action plan, a programme of further improvement is being implemented at present.

In a system which is responsible for disbursing large amounts of public money, a balance has to be struck between the need to secure the system against fraud and abuse and the need to ensure ease of access for people who are entitled to benefits. There are detailed procedures and checks in place to ensure that payments are properly made and claims are properly authorised. The Department also has a control programme in place which aims to keep fraud and abuse to a minimum. Control activity is co-ordinated by a central control division which also liaises with other agencies, national and international, in relation to control matters. It includes a central unit which focuses specifically on fraud and developing best practice in combating fraud. The Department liaises with other relevant agencies in the delivery and control of schemes. Exchange of information with these agencies takes place within existing social welfare and data protection legislation and is another important element in combating fraud and abuse.

The level of overpayments in 2001, at €26 million, represented about 0.3% of total scheme expenditure that year. Overpayments can arise for different reasons, including deliberate fraud, failure to notify changes of circumstances to the Department, or error on the part of the claimant or the Department. Recovery of all types of overpayments is pursued in accordance with a code of practice under which all overpayments are regarded as a debt due to the Department but which also outlines the circumstances in which recovery of overpayments can be deferred, suspended, cancelled or reduced. Overpayments recorded in 2001 were down by some 3,300, or 10%, and by €0.93 million, or 3.5%, from 2000. Overpayments recovered in 2001 amounted to €15.06 million, up by €2.6 million, or 21%, on 2000. This figure is higher than normal due to the inclusion of cases which had been held in suspense pending the outcome of a Supreme Court appeal relating to the power to recover certain overpayments.

The topic of overpayments was previously discussed in some detail by this committee in the context of examining the 2000 accounts and a number of aspects of overpayments practice have been reviewed in the light of points raised by the committee at that time. New criteria have been devised governing the recovery of overpayments and, in particular, the circumstances in which unrecovered overpayments may, for accounting purposes, be classified as written-off. A central overpayments and debt management unit has been established to ensure consistent debt management practices across the organisation and to monitor overpayment recovery.

The existing system of raising, notifying and analysing overpayments and recovery has a limited computerisation element which needs to be updated and enhanced. We are now making arrangements for putting in place a new computerised overpayments system which will facilitate more effective management of this aspect of the work and provide better support to the Department's debt management and control functions. This is a major project with implications for many of our other systems which will have to link with it but I hope to make substantial progress on it this year.

Prosecution for offences under the social welfare code is another important element of the overall control effort and a key deterrent to fraud. The Department has an active prosecutions policy in relation to offences carried out by claimants or employers. There is provision for cases to be taken on indictment but generally speaking cases are taken by summary proceedings. In 2001 there was by comparison with 2000 a drop in the number of cases referred to the Chief State Solicitor's Office - 163 as against 263. More recently there has been an increased focus in the Department on prosecutions policy and on ensuring consistency of approach across the Department in relation to the taking of prosecutions. A new set of guidelines has been put in place governing the taking of prosecutions and guidance has been provided for inspectors in relation to the legal aspects involved. Civil proceedings may also be taken to facilitate the recovery of overpayments or the collection of arrears of payments due, taking account of, inter alia, value for money considerations. A total of 14 such cases were referred in 2001.

There are a number of recent or planned developments in the social welfare system generally which will have positive effects for the control of fraud and abuse of the system. The Department's overall control strategy has been reviewed by a group of senior managers and a new strategy is being put into effect. Arrangements are also being made for the carrying out of surveys to measure baseline levels of fraud and error in a number of schemes including unemployment, lone parents and sickness schemes. This is being done in co-operation with the Comptroller and Auditor General. The Department is responsible for the issue and control of the personal public service number and is devising new procedures for the verification and authorisation of identity at the point of application. This is important to the REACH programme, which is focused on the more integrated delivery of public services and which will involve the more extensive use of the PPSN as a common identifier across the public service. Obviously, that has implications for control as well as service delivery.

We are also developing a new service delivery model for social welfare services using a new technology platform and a new organisational model to provide a more personalised and integrated service to customers of all the schemes. This project has been implemented in the initial stage in the child benefit area. There is also the planned development of a central overpayments computer system, as mentioned earlier, to track all aspects of the setting up and recovery of overpayments and to produce more accurate and timely reports.

The overall aim is to achieve a proper balance between the need for good customer service and adequate safeguards to ensure the proper use of taxpayers' money. I hope the committee will be satisfied with the approach we are taking and I will endeavour to deal with any issues which the members of the committee may wish to raise. The C&AG drew attention to the comparison between 2000 and 2001 in relation to the number of prosecutions. Prior to this, we depended on the local inspectors and managers to identify cases for prosecution and bring them to our attention. We are now taking a more active approach and I expect the numbers to come back up to previous levels.

Deputy Curran

I will start with overpayments and if any of my colleagues have a specific point to make about overpayments they should feel free to contribute rather than waiting until I go on to something else.

I read Mr. Hynes's report this morning and I appreciate that the expenditure of his Department, at €7.8 billion, is very substantial. While the figure for overpayments, at €26 million for 2001, is a very small percentage of this, it is in its own right worth considering. I noted from the report that over the previous five years there were about 30,000 cases per annum of overpayment. I would like a simple explanation of how these cases are identified.

Mr. Hynes

Overpayments can arise in any of the schemes we run, of which there are a large number, as the Deputy will see from the list that was circulated. They are identified in the course of the administration of the schemes by our inspectors, who go out and investigate cases and identify whether people gave us the correct information when they were making their claims. We must then decide whether that is a case of deliberate misrepresentation or fraud. We also receive information from the Revenue Commissioners: when people take up employment the employers are required to notify the Revenue Commissioners and that information is transferred back to the Department. We tie that in with our records of people claiming unemployment payments and if there is an overlap we can spot it straight away, so we identify that as a case to be investigated.

Deputy Curran

Is there a check-back system or a monitoring system for verification? The Department has identified 30,000 cases of overpayment, but are there more cases that are unidentified?

Mr. Hynes

The information from Revenue is probably our main source and we receive that on a monthly basis. We regularly run that against our own records to identify obvious overpayments. I would not presume to say that 30,000 represents all of the overpayments that occur. No system is 100% foolproof. We get a lot of information, particularly in the area of unemployment payments and lone parent payments, about people who are earning amounts to which they are not entitled. That information comes to us and we use it.

Deputy Curran

I take it that information would be classified in the Department's figures as the fraudulent section.

Mr. Hynes

It depends. The definitions in the legislation say that if a person deliberately and knowingly provides us with information they know to be incorrect, this is to be regarded as fraud. Cases are investigated: we look into the circumstances of each case to see what gave rise to the overpayment. Generally, if people are working and at the same time claiming unemployment payment, that would be fraudulent.

Deputy Curran

Is it classified as such in the Department's figures?

Mr. Hynes

Yes.

Deputy Curran

This makes up about a third of the overpayments.

Mr. Hynes

Yes, roughly.

Deputy Curran

So the other two thirds - about 20,000 - of the overpayments are not fraudulent.

Mr. Hynes

Yes.

Deputy Curran

Of what are these overpayments the result? How do they occur and how are they identified? This is the bit that confuses me. I can understand if something is fraudulent and information comes to light, but how does this happen for the overpayments that are not fraudulent?

Mr. Hynes

One major category is what we call estate cases, in which people are claiming pensions and do not inform the Department of the capital they may have. It is only when the person dies that this information comes to light, and we recover it. We do not classify that as fraud. Sometimes people give use incorrect information but do not do it knowingly or with deliberate intent to defraud the system. That is an overpayment but is not classified as a fraudulent overpayment. Errors also occur in the Department or there may be an error on a claim for which a person cannot be blamed or which cannot be classified as a fraudulent act.

Deputy Curran

When an error occurs for which a person cannot be blamed or an error occurs in the Department, is the individual pursued in relation to overpayments?

Mr. Hynes

Yes. We regard every overpayment as a debt which should be recovered.

Deputy Curran

Therefore, the Department pursues a person who is in receipt of a social welfare payment of some sort as a result of a mistake by the Department.

Mr. Hynes

We would contact and talk to the person. There are circumstances in which we would not recover the overpayment, or we would defer it depending on the circumstances. There is a code of practice which we have published in relation to the circumstances in which we do or do not recover, defer or reduce the repayment. In principle, every overpayment is a debt that we are required to recover.

Deputy Curran

Where individuals have been overpaid and have not fraudulently or deliberately looked for the overpayment and depending on the form of social welfare I, as a public representative, would consider it very harsh that they should be pursued for that money where their income is not considerable.

It is mentioned in the report that computerisation should improve these figures in the coming years and that the existing system of raising, notifying and analysing overpayments and recovery has a limited computerisation element which needs to be updated and enhanced. Could Mr. Hynes explain that? What is envisaged?

Mr. Hynes

When an overpayment is identified it is notified to the central overpayments area of the Department. This is a manual system, so overpayment returns are made at the end of a year and they are collated by the overpayments section. That is how we get our information on the level of overpayments. What we want to do is set up a computerised system whereby, when an overpayment is identified, it goes onto the system immediately. There would be links with other schemes in the Department, so if somebody incurs an overpayment in one scheme and is claiming on another scheme, we are immediately able to make the link and set about recovering the overpayment straight away in respect of the other scheme. It is a more efficient system of linking the different schemes. At the moment we have different computer systems for the different schemes in the Department. This is a way of linking those in relation to overpayment recovery.

Deputy Curran

The computer system consists of stand-alone modules which do not talk to each other.

Mr. Hynes

In many cases, yes.

Deputy Curran

Notification of overpayment is only on an annual basis rather than ongoing.

Mr. Hynes

If a local office or a scheme area identifies an overpayment, there is a requirement to set about recovering it straight away. That is what happens. There are procedures whereby if somebody is claiming a payment we can deduct any overpayment from it. The notification to the central overpayments unit is a separate exercise which happens manually. It happens on an ongoing basis. This information is collated annually for the purposes of the accounts and so on. What we are talking about is a more efficient system of linking the schemes so that if somebody incurs an overpayment on one scheme, for example, on unemployment, and they claim disability benefit, we are able to link the two more efficiently and have a better system of recovery.

Deputy B. O’Keeffe

It seems there are two stand-alone systems. How much of the overpayments are the fault of bureaucracy within the Department? What percentage relates to errant claims? Is it not quite easy for duplicate payments to be made, given that there are stand-alone systems?

Mr. Hynes

The figure I have for 2001 relating to the amount of overpayments due to departmental error was €2.8 million approximately. In other words, about 10% of overall overpayments in that year would be classified as due to departmental error. In principle, the overpayment is recoverable in those cases. However, there is a code of practice, and under the code of practice if the failure arose as a result of an error by the Department and if the person could not reasonably be expected to have been aware of the error, we have power to reduce or cancel the recovery of the overpayment.

Deputy B. O’Keeffe

What was the number of cancellations in relation to departmental errors?

Mr. Hynes

In 2001, while there was a total of approximately 8,000 cases of departmental error where an overpayment was raised, we cancelled roughly 500.

Deputy B. O’Keeffe

There were 8,000 cases and 500 were cancelled.

Deputy Curran

That means 7,500 were pursued in cases that were due to a mistake by the Department.

Mr. Hynes

That is right.

Deputy McCormack

I note that in 2001 recoveries are recorded as being 10% down, in other words, in 3,300 out of about 33,000 cases of overpayment there was no recovery. Was this in any way related to the change in the method of calculation in 1998 or 1999? How was the change in the method of calculation of some overpayments arrived at?

Mr. Hynes

We had previously classified as fraud or suspected fraud what are called estate cases where people on pension did not notify us of capital they might have had and we only found out about it after the event. It was decided to change that classification to remove them from the fraud category and not to regard them as fraudulent in that sense.

Deputy McCormack

That brings me to cases where the estates of old age pensioners, particularly those who have been in receipt of an old age pension for a long time, are sometimes pursued because of the capital they have accumulated. In some cases pensioners' relatives have looked after them, fed them and clothed them and the pensioners have spent nothing and have accumulated a lot of funds as a result of having received an old age pension. They might die with an estate amounting to anything from €70,000 to €100,000 after 20 years or more on an old age pension. Is it not unfair that the relatives of such old age pensioners who looked after them are penalised by the State trying to claim back some of what these pensioners had in their accounts? How is that kind of case dealt with?

Mr. Hynes

I will start off by saying that the legislation requires us to recover in those cases. We are required to pursue the recovery of any overpayment.

Deputy McCormack

Take the case of the old age pensioner who has only what is allowed in savings when he claims the old age pension, and that is exempt. He then lodges his old age pension in an account. That pensioner never intended to defraud the State.

The manner in which he or she had been raised is the reason they save all their money and they cannot help it. Yet the Department of Social and Family Affairs wants to take back what is legitimate money from that old age pensioner's estate. It causes great distress to families and relatives who may have looked after an old age pensioner for, perhaps, the last 20 years of their lives.

Mr. Hynes

This issue was raised at a previous meeting, at which the Deputy was present. We examined the issue following that meeting. What emerged from a sample of cases looked at was that about 60% were cases where the person had capital or income at the time they claimed the pension but did not notify the Department. Some 40% were of the type mentioned by the Deputy where the person had increases in their capital over the course of their pension lifetime about which they did not notify us. We also looked at the circumstances of those left behind. Generally speaking the majority of the people in this category were single, so there was no family situation.

Deputy McCormack

We are talking about neighbours and other relatives who cared for, clothed and, in some cases, housed them. I agree it is mostly single people who lived in that manner.

Mr. Hynes

If the money is in the estate and we are required to collect it, that is what we do. There would only be a very small percentage of cases where there would be a husband or wife involved. That is the position and the line we take on it. We should be informed of changes and people are required to tell us of changes in their circumstances but where they do not we have to recover it. In a sense, if the money is in the estate, frequently the family may not know about it. We deal with the personal representative who is required to inform the Department of the estate. Then we calculate what is due to be repaid.

Deputy McCormack

If the 40% had the correct entitlements to qualify for the pension and later accumulated assets exceeding that amount, how many of those to whom the estate was left, be it relatives, neighbours, etc., have been pursued?

Mr. Hynes

Generally speaking, we pursue them all.

Deputy McCormack

It is unfair that the person who looked after an old age pensioner for the last 15, 20 or 25 years of his or her life will be penalised if the pensioner saved up and left them something in their estate. Those who looked after such people probably kept them out of institutional care. If they were allowed to live in the manner in which they had lived, they would certainly have ended up in institutional care or would have died much earlier. The person who carried out the caring duty will be penalised because of the savings the pensioner has accrued.

Mr. Hynes

The means test already provides for disregarding certain amounts of capital and income which are fairly substantial. That has to be taken into account when considering this issue.

Chairman

I note that the write-off is a static figure of an average of €10 million per year.

Mr. Hynes

We had an arrangement that if overpayments were outstanding for three years and there was no recovery activity during the three years, those overpayments were written off. Written off simply means they are written off the accounts, it does not mean the overpayment is forgotten. If recovery becomes a possibility after that time we can still activate it. The reason for it was that the volume of overpayments on the accounts was becoming so great that it was considered we should write-off at that stage. That issue was raised at a previous meeting of this committee. Following that, we have taken another look at the policy on write-offs. We do not now automatically write them off after three years. We consult the scheme area and ask what are the possibilities. If there is a good possibility that we can take some recovery action we do not write it off.

Chairman

I wish to ask one question about the graph in the Comptroller and Auditor General's report. The graph for "other" is considerably larger than for "fraud". It goes from €7.9 million to €15.5 million in 2001 and the graph on fraud goes from 18.4% down to 11%. Given the reclassification of certain items, is that the reason for the reduction in the fraud area?

Mr. Hynes

That is correct.

Chairman

Under "other", a substantial amount of money is lost——

Mr. Hynes

In the non-fraud cases.

Chairman

The non-fraud cases, are those merely in-house errors?

Mr. Hynes

Not mainly, it would be cases where people do not give us full information about their circumstances but it is not fraudulent on their part.

Chairman

It is not fraud.

Mr. Hynes

Or where a person returns to work and continues to be paid for a time afterwards. Generally speaking that would be fraud but there could be circumstances where it would not be, where a person would not know about it.

Chairman

If that is not fraud what is your exact criteria for fraud?

Mr. Hynes

The legislation says the person must have knowingly given us wrong information or made false representations to the Department. That is what is regarded as a fraud or a suspected fraud.

Deputy B. O’Keeffe

Would the Comptroller and Auditor General regard 10% of other payments emanating within the Department as an issue about which you would be concerned? Both of us have been around the fringes of the Committee of Public Accounts for a long time and computerisation and integrated systems form part of every discussion with every Department. Will the system ever be properly integrated? I would have thought that Mr. Hynes's Department in particular was one where an integrated system was absolutely essential because of the myriad schemes in place.

Deputy McCormack

It appears that between 1997 and 2001 there were over 152,000 individual cases of overpayment, between social insurance and social assistance.

Mr. Purcell

We will never get to an ideal situation where there will not be overpayments. The best way to judge the Department in its performance is to look at how similar administrations perform in this area. Working from figures off the top of my head, they stand up quite well in comparison to the Benefits Agency in the UK and to similar agencies in other jurisdictions. That is the only barometer one can use because——

Deputy B. O’Keeffe

That is a great barometer to be working on.

Mr. Purcell

I am referring to other administrations. The one I would be familiar with is the Benefits Agency in the UK.

Getting back to the level of recorded overpayments which Deputy Curran touched on, this is something that has exercised my mind for some years in terms of how much of that is the tip of the iceberg. The control activity of the Department is quite extensive but we would wish that would be properly targeted and so on. In an effort to get a handle on the true level of overpayment, we have been working with the Department over the past year in doing random surveys to try to extrapolate figures which could give a view on what the level of overpayment might be. We could then establish the appropriate quantum of resources to tackle that problem. That will not be easy, however. We are looking at some work that has been done in other jurisdictions but it is a long-term exercise. The Accounting Officer referred to that in his opening statement. I am not sure that we can be successful but it may work better on particular schemes than on other schemes like sickness benefit, or disability benefit as it used to be known. By the time some of those people are surveyed, they have gone back to work and it can be quite difficult. We are doing some work in that area to try to get behind these figures.

I am conscious of the fact that I regurgitate these figures each year for the committee's digestion and I might not be giving the full picture. We have to work closely with the Department on this, however, and the Department has shown a willingness to engage in this work with us. I just want to put that on the record.

Chairman

Mr. Hynes, I was glad to hear you mention technology, the public service number and service delivery in your opening statement.

Mr. Hynes

On the point Deputy O'Keeffe made, we have been discussing that for a long time but we have very big systems in the Department and to change and integrate these systems is very expensive and requires huge investment. We have made some progress. We have integrated our short-term schemes so that the unemployment and disability benefit schemes now work on the one system but to get all of our schemes on the same system is a major job.

I mentioned what we call the new service delivery model project which we are starting. We are trying to have the same kind of computer platform for all our schemes, which is a major job. We started with the child benefit system and with that new system in place we hope to move on to the pensions area and, hopefully, we will eventually get all our schemes on the one system. That is a major task, however, because not only do we have to change the IT systems but we also have to change the way we organise the schemes, including the staffing and organisational arrangements. It is a big job but I take the Deputy's point that——

Deputy B. O’Keeffe

In his opening statement Mr. Hynes said he is hoping to make substantial progress this year.

Mr. Hynes

Yes.

Deputy B. O’Keeffe

From his general statement, however, I get the impression that this is a long-term project.

Mr. Hynes

What I was talking about in relation to this year is the overpayments system. This is a separate computer system to identify overpayments and to link the different systems in the Department. That is one aspect on which we would hope to make substantial progress this year. Integrating the systems overall, however, is a much bigger and more long-term project.

Deputy McCormack

Why was 1999 a particularly bad year? There were 39,000 cases of overpayment of social assistance and insurance. What was the reason for that when everything was going well in the country?

Mr. Hynes

I am not sure what figure the Deputy is reading from.

Deputy McCormack

Chapter 11(1) on page 109. There were 18,000 cases of social insurance overpayment and 21,000 cases of social assistance overpayments. Perhaps it was after the change in the method of calculation.

Mr. Hynes

It is possibly due to the live register figures at that time. There is a close linkage between the level of overpayments and the live register because many of the overpayments we identify tend to be in the unemployment schemes area.

Deputy McCormack

Would it be due to the fact that people were able to get work and continue on social welfare?

Mr. Hynes

That is a possibility. There would be a percentage of cases where people work and claim and they are part of the numbers we identify.

Deputy McCormack

I have to leave the meeting to go to the Dáil.

Deputy Dennehy

From a rough calculation the Department has approximately 1.5 million customers. In my Dáil contribution I said I would like to see an analysis of the number of transactions in the year, which I am sure amounts to tens of millions. I am surprised the overpayment element due to departmental error is as low as €2.8 million because of the number of cases involved and the complications that can arise, as those of us on this side of the table are well aware. That figure of €2.8 million would hardly cover the cost of a decent inquiry these days so I would not be as dismal about it as some other people because of the huge number of transactions.

I agree with the need to link all Departments. In that context, when decisions are made affecting one Department, do they apply across the board? I am thinking of the recovery of overpayments, for instance. There is a kerfuffle going on currently regarding the overpayment to general practitioners. The GPs have a very strong union and they are suggesting they will go on strike if necessary to defend the fact that they did not make any error. It was a departmental error. If a decision is made in their case not to proceed with attempts to recover those overpayments, will that have a bearing on Mr. Hynes's Department? Will the same protocol be observed?

In the same context, many of us have dealt with claims, particularly in terms of degree of disability, etc., which can take two or three years to determine after which time people may get back arrears. There was a decision made by the Ombudsman concerning the Revenue Commissioners because he discovered that when they hold on to people's money, they must pay interest on it. If that is accepted, will it automatically apply to Mr. Hynes's Department? I have one more question——

Chairman

Do you want to hear a reply on the other questions first?

Deputy Dennehy

Yes.

Mr. Hynes

Thank you, Deputy Dennehy. In relation to the first question, I understand the number of transactions is 55 million per year.

Deputy Dennehy

In fairness, that is very impressive.

Mr. Hynes

On the question about the overpayments in the health area, the answer is "No", it would not affect our own position because we operate under our legislation and under that legislation there is a code of practice that we publish and of which people are aware. We operate under that and we would have to continue to do that until the legislation is changed.

In relation to the issue raised by the Ombudsman, a similar issue arose in our case a number of years ago concerning people who claimed their pensions late and the question arose as to whether we would pay interest on late payments of pensions. That issue was addressed. We pay interest in cases where there is a delay in claimants receiving their payments.

Deputy Dennehy

On the issue of whether an error was internal or external, I am concerned more with cases that are contested rather than those involving late claimants. As Mr. Hynes is aware, it can often take a number of years before a pensions application is accepted. However,the important point is that the Departmentwould pay interest on payments in such circumstances.

Mr. Hynes

We would.

Deputy Dennehy

On the question of linkage raised by my colleague Deputy O'Keeffe, two weeks ago we heard from the Comptroller and Auditor General of massive fraud concerning property developers and major companies. I made the point that if the people involved were not registered, they did not exist on the records of the Companies Registration Office. One family involved ran 20 to 30 construction companies. The Revenue Commissioners should examine the revenue implications of such fraud. I presume the Department would be losing out on PRSI contributions in respect of employees in such companies. Is there a linkage in place as regards the Department, the Revenue Commissioners and the Companies Registration Office to ensure the Department is aware of people trading?

Mr. Hynes

The Revenue Commissioners are responsible for the collection of PRSI contributions. In the course of their investigations if they come across cases involving fraud on the tax side, there is also likely to be fraud on the PRSI side. They have an obligation to deal with that and to collect those contributions.

We have our own inspection cadre, part of whose work is to investigate employers, and they work closely with the Revenue's investigation branch in that regard. There is a joint investigation unit where our inspectors and the Revenue inspectors work together on particular projects or visit particular sites. Therefore, there is close co-operation in that area.

Deputy Dennehy

I have raised this matter previously. The biggest offender in such cases is the person who has the most money. I found it fascinating that one such offender in Dublin could run three or four large pubs and another such offender could build massive blocks of apartments and nobody knew anything about their offences officially. If a person working on a building site is injured and makes a claim on the company for insurance cover and if the company is not registered officially with Revenue, would that anomaly pop up in the Department's records? Is there a linkage between the Department and Revenue whereby alarm bells would ring in Revenue that the person injured is employed on a building site by a employer who is not paying any money into the kitty?

Mr. Hynes

I would hope so. We work closely with Revenue. If a person were to claim occupational injuries benefit, which a person would in those circumstances, we would——

Chairman

There is a system of checks and balances.

Deputy Dennehy

There does not seem to be one. We need to tease this matter out. The CRO indicated that if a comma is put in the wrong place in respect of a company it cannot trace it and that it will now use the social insurance number to register the director or owner of a company, but up to now the system in that regard seemed to have been operated willy nilly in that nobody appeared to have a clue who was operating such companies, having regard to the accounts we have got. Is there a tracking mechanism in place? I would welcome Mr. Hynes telling me there is one in place.

Mr. Hynes

If there is a claim——

Chairman

Would it be checked out?

Mr. Hynes

We would check the record and if a problem was identified in the contribution record at that level, it would come to light in our system. We would then check the case with Revenue because it is responsible for the collection of the contributions.

Chairman

That would be paid on the contributions paid in would it not?

Mr. Hynes

Yes. We would pay the person concerned regardless of whether the contributions were paid, but we would follow up the case afterwards.

Deputy Dennehy

That is the part I want to know about.

Deputy B. O’Keeffe

How many decisions by the Department on cases referred by the Ombudsman have been appealed to the appeals office? How many cases is the Department dealing with from the Ombudsman's office? How can responses be secured from the appeals office more readily as the delay in decisions is frightening? The position is unsatisfactory for the people engaging in the appeals mechanism and, from our point of view, it is extremely frustrating.

Mr. Hynes

I take the Deputy's point about the length of time it takes to deal with appeals, something of which we have been conscious for some time. We have put additional resources into the appeals office. The length of time taken to deal with appeals has been reduced and we are hoping to make further progress on that. To some extent, the appeals process has in-built delays because it is a quasi-judicial process and both sides have to be given an opportunity to put their case before an appeals officer. If there is an oral hearing to be held, that has to be set up in whatever part of the country the case arises. There is a certain in-built delay in the process, but I accept the Deputy's point.

Chairman

What is the average timescale for appeals? Deputy O'Keeffe has raised an important point.

Deputy B. O’Keeffe

In some cases there has been a delay of six months before an appeal is adjudicated on.

Mr. Hynes

In the case of oral hearings, the timescale mentioned by the Deputy is not far off the mark. Five months was the average timescale involved.

Chairman

Is it the intention to reduce that period to two or three months?

Mr. Hynes

I hope we are talking about that type of timeframe.

Deputy B. O’Keeffe

Can Mr. Hynes give me figures on the number of appeals lodged and the number of referrals to the Department from the Ombudsman?

Mr. Hynes

I take the Deputy's point about the delay involved. I do not have figures on the number of cases on appeal with me, but I can send that information to the Deputy.

We had a consultancy report prepared on the social welfare appeals offices last year, in which a number of recommendations were made about making the system more efficient. We are trying to establish if there are cases that do not have to go to appeal. If we can deal with them before they enter the appeals process, that would speed up the process a little. We are examining various proposals on that front to try to speed up the system.

We are not dealing with as many cases from the Ombudsman as we used to, but there are always a number of issues. We had a number of major issues with the Ombudsman in recent years, including the issue mentioned earlier of late claims and how we dealt with them and the payment of compensation in respect of late claims. However, in most cases we have dealt with the major issues. There will always be cases where we may not have treated people properly and such people will approach the Ombudsman who will raise the matter on their behalf with us. Off the top of my head I would say if we have two dozen cases ongoing from the Ombudsman, it is as much as we have.

Deputy B. O’Keeffe

Complaints have been made in recent months that there has been a significant slowdown in the processing of claims in the Department.

Mr. Hynes

I would never be entirely happy with the systems. We have had particular difficulties in certain areas of the Department over recent months regarding particular issues. There was a significant delay last year, for example, in the child benefit area because we were putting in the new system. The numbers of people claiming payments are increasing substantially. We are trying to get better information technology systems and computers to make the system more efficient. However, we have not got there yet. I accept that delays in some cases are greater than we would want them to be, but we are working on it. I hope we can make substantial improvements.

Chairman

It is imperative to implement the SMI report in order to achieve best operational practice in the Department.

Mr. Hynes

We try to identify cases with which we need to deal and deal with them quickly. There will always be cases which will be delayed, but we will try to minimise those.

Deputy Curran

I was impressed with the figure of 55 million transactions per annum. We spoke about overpayments. That figure puts the scale of the operation in context. I am glad that payments for dental treatment will once again be made. There was a dispute and negotiations took place over a protracted period. Will the people who paid for dental treatment during the dispute be reimbursed?

Mr. Hynes

I do not think I can be——

Deputy B. O’Keeffe

That is a loaded question.

Mr. Hynes

I might be new——

Chairman

Does the Deputy want to pursue that question?

Deputy Curran

I take it I am not getting an answer.

Mr. Hynes

I would be straying into the policy area.

Deputy Curran

I was referring to the practical side. I take it the Department does not have a view on it. Has a decision been made about what is happening?

Mr. Hynes

It is a policy issue which must be dealt with.

Deputy Curran

Has it not been addressed?

Mr. Hynes

No.

Deputy Curran

As regards computerisation, one aspect dealt with overpayment. Is there a second computerisation piece in the jigsaw in terms of the service model?

Mr. Hynes

I did not explain that too well. When I mentioned overpayments, I meant an overpayments computer system. It would be a small system by overall standards, but it would be a way of identifying overpayments and having them centrally collected and notified to the other systems, such as the child benefit system, the pension system or the short-term benefit system in the Department. The other project I was talking about was a new platform for the delivery of all our schemes. We call it the new service delivery model and we introduced it in the child benefit area. It is a completely new computer system and a platform for delivering the schemes. It is more user friendly and it is easier for the staff to operate than the other systems we have. We hope to eventually roll that out to all the other schemes in the Department, but that will take a number of years to achieve.

Deputy Curran

I thank Mr. Hynes for clarifying that. I could not get to grips with what Mr. Hynes said about it earlier. I note in the Vote that in 2001 the savings for office machinery and other supplies were due mainly to the fact that following the completion of the analysis and development phase of the delivery service model project, the hardware requirements were significantly reduced. It also refers to the delayed delivery caused by the events of 11 September in the USA. I am surprised that although we were trying to push the project forward, we did not take up the provisions we had made. There seems to have been a time delay.

Mr. Hynes

It was not as much a time delay as the fact that when we were planning the new system, we did not know how much it would cost until we went to the market and received bids. We did not spend as much money in terms of the estimate compared to the outturn.

Chairman

How do you know you are getting a compatible system in which you could invest heavily? Are you looking at systems outside the jurisdiction?

Mr. Hynes

We have contacts with a number of similar agencies in other countries. We went through a lengthy system of planning. Before we introduced the system in the child benefit area, we asked a number of companies to come in and build prototypes to see if the system would work in practice. We put a lot of work into the preparation of it. We are fairly confident the system works. It works in the child benefit area and we believe it will work elsewhere.

Chairman

The cumulative loss figure of €47 million for 1997 has increased to €65 million. Do you expect that figure to decrease?

Mr. Hynes

We hope to bring that figure down with a more effective system of recovering overpayments. I would like to achieve that, but I would not like to be tied to it.

Chairman

The level of questioning was good today. Your replies, Mr. Hynes, were impressive. A Department with a budget of €7.5 billion is a big one to control. Public service numbers, service delivery and customer satisfaction are important because it is customer driven. It is difficult to deal with many customer transactions. The replies today suggest that improvements will be evident in forthcoming reports.

Mr. Hynes

Thank you, Chairman.